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This chapter throws light on the review of the previous literature on Human resourcemanagement practices; innovative HR practices; impact of the HR practices on employee ororganisational performance and HRM in Indian context. The last part of this chapterdiscusses the research gaps in these studies and the need for the present study.

2.1 Human Resource Management Practices

The concept of Human Resource (HR) was introduced by Prof. L. Nadler (1969) inAmerican Society for Training and Development Conference. In India, Larson and TubroLtd., a private sector company introduced this concept in 1975 in their organization with anobjective of facilitating growth of employees, especially people at the lower levels. Amongthe public sector government companies it was BHEL which introduced this concept in 1980.

Fombrun, Tichy, and Devanna (1984) expanded these premises and developed the model ofSHRM, which emphasizes a ‗tight fit‘ between the organizational strategy, organizationalstructure and HR system. According to him, political, economic and cultural forces areresponsible for an organization‘s mission and strategy. This explains these causal relations,which form the ‗tight fit‘ between strategy, organization structure and HR policies andpractices. On the basis of mission and strategy, the shape of organization is structured, i.e.,people are organized to carry out different tasks to achieve the organization‘s mission.

In a survey of human resource development practices conducted by Rao, T.V. (1982)

covering fifty three different industries in India, following facts were observed. Seventeenorganisations (32 percent) had a formally stated policy emphasises on human resourcedevelopment. The thirty one organisations (59 percent) did not have any formally statedpolicy on human resource development but claimed to emphasise it. In five organisations,there appeared to be no such emphasis on human resource development. Secondly, Twenty-six organisations (49 percent) stated that their personnel policies give high importance to thecontinuous development of their employees. Another twenty one organisations (40 percent)stated that there is some emphasis on human resource development in their personnelpolicies. Four of the organisations surveyed didn‘t seem to lay any emphasis on humanresource development in their personnel policies. Two did not respond. Thirdly and the most 22 REVIEW OF LITERATURE

importantly, there was a separate human resource development department in the

organisations studied. This survey indicated a positive trend of using open appraisal system,improving the training function, making up organisational development activities and usingemployees counselling by an increasingly large number of companies.

Barney (1991) pointed out that firms could develop strategic capability and for attaining this,the strategic goal will be to create firms, which are more intelligent and flexible than theircompetitors. The human resource management function has emerged as one which act asdifferentiator among various firms.

Hendry and Pettigrew (1990) proposed that a number of internal factors such as theorganizational culture, structure (positioning of HR), leadership, level of technologyemployed and business output directly contribute to forming the contents of HRM.

Snell and Dean (1992) agreed that Human Resource Practices were the primary means bywhich firms invested in their employees. Human Resource Management has moved itsconcern from domestic focus to multi-national focus, more escalating concern for issues likeecological, health care, and illiteracy. They also demonstrated that Human Resource Practicesto be employee centric and need to be business centric as well.

Kochan and Dyer (1993); Walker (1993); and Cusworth and Franks (1993) suggested that afirm should aim at developing various HR practices as complementary to one another.

Amba-Rao (1994) carried on a study to explore the HRM policies and practices in a smallgroup of firms and industries in the Indian context. Semi-structured interviews wereconducted with HRM executives and general managers in ten firms in the Hyderabadmetropolitan area in India, to examine their HRM practices. The specific HRM functionsconsidered under this study were: staffing, performance appraisal, compensation, training,motivation and employee relations. In examining the strategies, several contingency factorswere also identified. These included the firm's internal and external contextual factors. Theinternal factors were: (1) management style; (2) degree of centralization of HRM strategiesand their linkage with local subsidiary practices in the case of MNCs; and, (3) extent ofprofessionalization and formalization of the HRM department. The external contextualfactors were: (1) Government role; (2) labour market conditions; (3) organizationalinformation net work (4) market and technology; (5) unions (6) socio-political factors; (7)industry, location or other firm specific factors. The study found that the HRM departmentshad a visible role in policy and implementation. Further, all the managers had reportedinvolving line managers in implementing the HRM function.

Loveday (1994) in his doctoral thesis titled ―A Study of HRM with special reference torecruitment, selection and training of managerial and non managerial staff in the NigerianBanks‖ stated that, ―The most important of all factors of production in business is the humanfactor unlike the component part of a machine, the people who comprise a human organism,are something more than just parts of that organisation. Flesh men and women withsentiments, ambitions and needs of their own ranging are beyond the confines of theorganisation. The extent, to which these people serve the needs of the organisation willingly,enthusiastically depends upon the extent to which the organisation serves their needs asaspiring human beings.‖ He also added that, the HRM strategies include job analysis, humanresource planning and forecasting. Efficient HRM ensures that systematic steps are used torecruit, select, train employees so as to show them the ladder by which they can attain theirdesired goals.

Pfeffer (1998), in his study, mentioned about employment of the various HR practices such assecurity, selective hiring of new personnel, self-managed teams, decentralization of decisionmaking as the basic principles of organizational design, extensive training, comparativelyhigh compensation contingent on organizational performance, reduced status distinctions andbarriers, including dress language, office arrangements, and wage differences across levels,and extensive sharing of financial and performance information, compensation practicesthroughout the organization, placement practices, training practices, employee grievanceprocedure, performance evaluation practices, promotion practices. All such practices areneeded for growth of the organisations. He concluded that having good HRM is likely togenerate much loyalty, commitment or willingness to expend extra effort for theorganization‘s objectives.

Stone (1998) remarked that HRM is either part of the problem or part of the solution ingaining the productive contribution of people. The above quotes suggest that organizationsneed to effectively manage their human resources if they are to get the maximum contributionfrom their employees.

Wright and Snell (1998) made an important observation that most of the Human ResourceManagement Models consisted of ―fit‖ components, which included Human ResourceManagement Practices, employee‘s skills and behaviour and flexibility. The ―fit‖ componentsfocused towards responding to a variety of competitive needs required for strategic and non-strategic considerations. Kay (1999) also supported this by adding that the Human ResourceStrategy must be an integral to organization‘s strategic processes contributing towardsorganization‘s overall performance. It was analyzed that the organizations relationship withenvironment could be handled with the help of suitable strategies.

Practices: Perceived Organisational and Market Performance‘, in the Malaysian furnitureindustry. The study found that managerial and non-managerial employees did not differ inperceived organisational performance; the managers perceived higher market performanceunlike the non-managerial staff. The result of the t-test indicated that the two groups didn‘t

Guest (1999) suggested the best Human Resource Practices that included: job design in sucha manner that employees have the responsibility and autonomy to use their knowledge andskills; selection process framed to carefully identify best potential; training as an on-goingactivity; two-way communication process to keep everyone informed; and employeeparticipation to increase employees‘ awareness about the implications of their actions, for thefinancial performance of the firm. Guest proposed a simple model (Figure 2.1) of HumanResource Management and performance which suggested that Human Resource Practicesinfluence directly to an employee‘s level of commitment towards his performance, which inturn has an impact on the organization‘s financial performance as an outcome.

Figure 2.1 A Simple Model of HRM and Performance

Source: Guest

Wood (1999) distinguished four different fits in his study based on the views given byvarious authors particularly in the area of Human Resource Strategy:  Fit between Human Resource Strategies and the business known, as ‗strategic fit‘;  Fit between a coherent set of Human Resource Practices and systems within the organization, known as ‗organizational fit‘;  Fit between Human Resource Strategies and the organization‘s environment , known as ‗environmental fit‘;

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 Fit between Human Resource Practices as coherent and consistent bundles, known as ‗internal fit‘.

which an organisation intended to adopt in managing its valued assets, i.e. the people. TheHR policies dictate philosophies and values as to how people should be treated.

Budhwar (2000) gave an overview of human resource management and the strong existingpattern of human resource practices in India with the specific objective of identifying themain contingent variables and national factors that influence Indian human resourcemanagement policies and practices. The investigation was based on a questionnaire surveycarried out in one hundred thirty seven Indian firms in manufacturing sector. Drawing fromthe literature, the influence of seven contingent variables on four sets of human resourcemanagement policies and practices were examined. The contingent variables included humanresource strategy, size, age, and life-cycle stage, ownership of organisation, industrial sectorand union membership. Apart from this, the study empirically examined the impact of fourhuman resource strategies on human resource function: cost reduction, talent improvement,talent acquisition and effective resource allocation. The impact of national factors on humanresource management policies and practices was examined by asking the respondents toallocate a maximum of 100 points to different aspects of national culture, national institutionsand dynamic business sector. The result showed that organisations, in the mature life cyclestage, were likely to adopt an annual career development interview scheme for the trainingand development for their employees. The organisations in the declining life-cycle stage werelikely to pursue recruitment of their clerical and managerial staff as apprentices. Suchorganisations were also likely to compensate their employees on the basis of their total workexperience. The organisations in the public sector adopted an annual career developmentinterview scheme but the amount of money spent and total numbers of employees trainedwere less in comparison to MNCs and private sector organisations. Regarding the nationalfactors, the results suggested that the three institutions of labour laws, trade unions,educational and vocational training significantly influence human resource managementpolicies and practices. Amongst the many aspects of a dynamic business environment, onlyan increased level of competition and a strong emphasis on customer satisfaction was foundto have a strong impact. Except for the sector-specific requirements, no other aspect of the 27 REVIEW OF LITERATURE

Pillai (2000) made an attempt to analyse the influence of the human resource developmentclimate existing in banks on the learning orientation of the employees. The objectives of thisstudy were to find the extent of influence of human resource development climate on thelearning orientation of its employees, to study the perception of OCTAPACE and humanresource development sub-systems in the banks among different types of learners, to studyhow do the bank employees with different learning orientation perceive the general climateexisting in their organisations. A total of three hundred respondents were selected by thestratified random sampling method. A questionnaire was used for collecting data. Learningorientation was measured by using a seven-point Likert-scale. The findings of the studyshowed that about 57 percent of respondents perceive the learning and development climateexisting in banks as moderate. Nearly 30 percent respondents considered that the humanresource development climate was good. More than two third of the respondents, whoconsidered human resource development climate as poor, had been found to have resistancefor learning orientation. The chi-square test was also applied and was significant at 0.01levels which showed that the perception of employees regarding the commitment of the topmanagement in the effective implementation of the human resource development initiativeswas positively related with the learning orientation of the employees.

Anakwe (2002) wrote a research paper which generated knowledge on different aspects ofhuman resource management practices in Nigeria analysed from the responses collected froma sample of 185 human resource management professionals employed in over ninety-sixcorporations located in three major cities in Nigeria. Furthermore, theconvergence/divergence/cross-vergence perspective was utilized to provide theoreticalinsights on the human resource management practices. The findings supported a cross-vergence perspective as evidenced by the blend of human resource management practicesreflecting both generalized or standardized practices and localized practices.

Purcell et al. (2003) emphasized that it was not about having a range of well conceivedHuman Resource Policies and Practices but it was about how these policies and practiceswere implemented. More purposely, Human Resource Strategies were concerned with the 28 REVIEW OF LITERATURE

development of continuous improvement and customer relation policies. The Study also,detailed about the contribution of front line managers in Human Resource policies andpractices. This pointed out the key areas in Human Resource like job and work design,flexible working, workforce resourcing, employee development, reward, and givingemployees a voice need to be developed for the successful implementation of highperformance work practices. Identifiable key factors affecting job satisfaction were found tobe career opportunities, teamwork, and good working conditions for employees. Finally, itcould be concluded that Purcell and his co-authors considered policies and practicesimplementation as a vital component in linking people to business, for effective managementof change, for creating workplace a good place to work and this being the prime task of linemanagers

In meta-analysis of 104 articles, Boselie et al., (2005) concluded that the top four HRMpractices were efficient recruitment and selection, training and development, contingency andreward system, and performance management that had been extensively used by differentresearchers. They identified 26 different practices that were used in different 104 studies, ofwhich these were the top four. These four practices could be seen to reflect the mainobjectives of the majority of strategic HRM programmes, namely, to identify and recruitstrong performers, provide them with the skills and confidence to work effectively, monitortheir progress towards the required performance targets, and reward staff well for meeting orexceeding them.

According to Dwivedi (2006), it is very difficult to initiate competitive strategy based on

human resources. The key to competitive advantage in the modern world is the application ofsophisticated HR policies and practices. This is because of the fact that competitors areunable to formulate an effective response in the short term. The human resources can help acompany to accomplish competitive advantage by lowering costs, enhancing sources ofproduct and service differentiation or by both. However, these activities must be managedfrom a strategic perspective to accomplish competitive advantage

Murthi (2006) explained the role of HR manager in the changing scenario as follows: ―Therole of Human Resources is curial to face the challenges of globalization, liberalization, profitmaximization and cost effectiveness. The present day aim is survival of the fittest. To face 29 REVIEW OF LITERATURE

the challenges in the world today we need constant changes in skills, attitudes andknowledge. This can be achieved only by the training department of an organisation. This canpave the way for industrial prosperity in the business world. The development of HumanResource is the key to the business survival and business success. All companies must looktowards developing a more highly skilled workforce to cultivate specialist skills in new areasand to attain a higher level of basic education and training. Training is a route to qualityperformance.‖

Purang (2006) compared the human resource development climate perceptions of middle-level managers of five Indian organisations. These organisations operated in different sectors,the two were public sector organisations, the two were private sector organisations and theone was a multinational organisation. The study hypothesized that the human resourcedevelopment climate perceptions of the managers in the private and multinationalorganisations would be more positive than in the public sector. The study used the surveyresearch method for data collection. Overall 247 middle level managers responded from allthe five organisations. The human resource development climate questionnaire developed byDaftuar (1996) was used, which included 27 items. Study showed that the human resourcedevelopment climate scores of the two private organisations and the MNC were significantlyhigher than the two PSUs.

Teseema & Soeters (2006) in their famous article "Challenges and prospects of HRM indeveloping countries: testing the HRM-performance link in Eritrean civil service" took eightHRM practices which were recruitment and selection practices, placement practices, trainingpractices, compensation practices, employee performance evaluation practices, promotionpractices, grievance procedure and pension or social security. They also found a significantrelationship between all these HRM practices and perceived employee performance.

Dwivedi (2007) concluded that, the survival and growth of today's organisation necessitateclose linkages between HR and business policy and planning. He also mentioned about theold and new concepts of the HRM.

Kundu et al. (2007) conducted a study on, ‗Human Resource Management Practices inShipping Companies: A Study.‘ The main objective of the study was to assess the humanresource management practices being practiced in shipping companies. Five factors – jobanalysis and HR planning, training and performance appraisal, hiring and compensationsystem, work-force diversity and flexible work system and career development were foundhighly correlated. Two factors namely training and performance appraisal and hiring andcompensation system emerged as very strong practices prevailing in different shippingcompanies. These two factors were followed by factors namely career development. Jobanalysis and HR planning was moderately practised in shipping companies. Hiring, training,performance appraisal, compensation and career development were strong human resourcedimensions in shipping companies. Job analysis and human resource planning were found asmoderate human resource practices. Practices regarding work-force diversity and flexiblework system were also prevalent in shipping companies but comparatively not as strong asother human resource dimensions.

Rajendhiran (2007) concluded in one of his papers that, the human resource is a very specialkind of resource. If it is properly managed the organisational effectiveness can be increased.Managers can influence productivity by the sound application of HRM programme.Recruitment and selection techniques can be used to attract and hire the best performers.Motivation and compensation techniques can be used to retain employees and improve jobperformance. Training and development can improve job performance or rectify deficienciesin skills and competency in increasingly performance of the employees.

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Vazirani (2007) is of the opinion that, the best HR Practices enable the company to affectradical improvements, not just incremental ones.

Codrina (2008) studied the HRM practices in different Romanian Private Companies andfound that the HR practices being adopted by different types of firms differed due to theirsize and activity length.

Haid (2008) in one of his studies in India explored four key drivers of retention. These are theHR practices named: performance management, professional development practices, managersupport, social responsibility leading to the employee attitudes and beliefs which in turn drivethe retention. A model was developed for the same in this study. These HR practices weresuggested to be implemented in the Indian organizations to increase the employeeengagement and retention, resulting in boosting their competitiveness in the growing Indianmarket, enabling them to address changing market conditions quickly and nurturing a pool oftalent that will give them the capabilities they need in the future.

Bharathi (2009) explained the value of HR functions in business and its impact on higherproductivity, enhanced quality, better customer service, good industrial relations and lowercost which influence the profitability of an organisation. Effective HR practices could playimportant role in achieving all the above said factors.

Chakraborty (2009) explained as to why the managers should be proactive. According to him,―Every organisation, department, team has different people and these people have to beunderstood, handled and dealt properly. In case you do not act proactively with such people,it would end up destroying the work culture and vitiate the whole work environment.‖

Chaudhari (2009) was of the opinion that, the HRM policies of an organisation are influencedby two major factors: situational factors and stakeholders interest. The situational factors arelabour markets, laws of the land, management goals, business strategies, technology,employee demography, position of the company. The stakeholders interest cover expectationsof shareholders, management, employees, government and society/community. These factorscan act as constraints on the formulation of HRM policies and can also be influenced byHRM policies. 32 REVIEW OF LITERATURE

Chendroyaperumal (2009) was of the view that the contributions to human resourcemanagement practices from India are rich and very effective but long remained ignored bythe scholars. For instance, Lord Buddha and Mahatma Gandhiji have all proved theeffectiveness of Indian human resource practices to the utter disbelief of the rest of the world.He studied therefore best HRM practices prescribed in Panchatantra (one of the ancientIndian works on management using the case method, a method to be discovered by the Westonly 5000 years later!) related to employee qualities and work, leadership, motivation,employee turnover and retention, research and development personnel, conflicts, andemployee care. He suggested in his study that practicing these HRM principles would resultin better management and utilization of human resource and thus would enhance theefficiency and performance of the whole organization. These HR principles from thePanchatantra are not only consistent with the modern thought on HR management but arealso applicable and easily practicable even today to organizations of all sizes at all places andtimes to all people.

Perception of gold-collar workers with reference to the relationship with top managers wasdiscussed through the thirty articles published over the period 2000 to 2006. With the help ofChenail‘s qualitative matrix (found in this study), the study thematically analyzed the HRantecedents that emerged into four distinctive categories. The study found that one must keepin view the variable personnel demands and extensive training and development needs ofknowledge workers, and highlights the need for attention to be paid to unique scientificpractices for managing gold-collar workers in knowledge-intensive firms.

Compton (2009) in his study mentioned that Human Resource Strategies must includerecruitment and selection, education and development, performance management, successionplanning, remuneration and finally retention of key players. He pointed out, that the previousapproaches to Human Resource Management were largely incoherent with no real linking tostrategic planning. Human Resource Management Models need to have clear link with theexternal environment, external customers, and suppliers. The internal strategic planningprocesses required to be developed so that it adds value to the organizations.

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Kumar‘s (2009) study revealed that Human Resource policies and practices were followed inIndian Cement Industry. Kumar also confirmed that human input was the single largest inputthat goes in the cement industry. This study proved the pertinent existence of HumanResource Practices in India. Kumar suggested that Human Resource professionals needed tofocus on the individual needs and aspirations to the extent that they develop the ethos oforganizational commitment. The Study also concluded that culture and leadership were thesignificant predictors of employee performance.

Kundu and Malhan (2009) intended to assess the HR practices in insurance companies.Primary data based on two hundred eighteen respondents from four insurance companies(two multinational-7 branches and two Indian-7 branches) were analyzed to assess HRpractices being practiced by insurance companies in India. ‗Training and benefits‘ was foundhighly in practice in the insurance companies. Further, ‗performance appraisal,‘ ‗selectionand socialization of employees,‘ and ‗HR planning and recruitment‘ were moderatelypractised in insurance companies. ‗Workforce diversity and contemporary HR practices‘ and‗competitive compensation‘ were also practised to some extent. ANOVA results showed thatIndian companies did not practise workforce diversity. Compensation practices were foundmore competitive or performance based in Multinational insurance companies than in Indianones. The gender effect showed that only competitive compensation was perceivedsignificantly differently by male and female employees/executives. Interactive effects weresignificant on workforce diversity and contemporary issues, training and benefits, andselection and socialization of employees. This study also concluded that the competitiveadvantage of a company can be generated from human resources and company performanceis influenced by a set of effective HRM practices. Finally, it was summed up in this study thatMultinational companies were comparatively weaker on performance appraisal, training andbenefits, HR planning and recruitment, and comparatively stronger on workforce diversityand contemporary issues, selection and socialization of employees and competitivecompensation than Indian companies. Multinationals were weak on some factors due to non-adaptation of local HR practices.

Birasnav and Rangnekar (2009) conducted a study on the structure of human capitalenhancing HRM practices in India. This study analyzed four hundred seventy twoemployees‘ responses who worked in Indian manufacturing industries, to identify the patterns 34 REVIEW OF LITERATURE

performance appraisal, recruitment strategy, career management, and performance-orientedtraining are the patterns or factors derived from the HR practices, and validity of thisstructure is also proved by confirmatory factor analysis. Furthermore, there were certainassociations found between these patterns and characteristics of both employees and firmsfrom regression analyses.

Nalband (2010) enquired into the HRM practices in the refrigeration industry and airconditioning industry and analyzed the outcomes of human resource management. The studycovered areas of human resource management/development including performance appraisal,training, career planning and development. It was concluded in this study that to retain theemployees, good HRM/HRD practices needed to be implemented.

Savaneviciene and Stankeviciute (2010) explored the ―black-box‖ between HRM andorganisational performance. On the basis of an intense literature review, they provided aninsight into HRM drawing a conclusion that there is no single agreed or fixed list of humanresource (HR) practices which are used to define human resource management. However, inthe same study, four performance measures were identified which could define how well anorganisation is being performed in the line with all the HRM practices. These were: HRrelated outcomes (affective, cognitive and behaviour); organizational outcomes (productivity,quality, efficiencies); financial outcomes (profit, sales); market based outcomes (marketvalue). The same levels of outcomes were proposed by Dyer and Reeves (1995); Boselie, vander Wiele, (2002); Paauwe, Boselie (2005). Figure 2.2 will explain this relationship in aclearer way:

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Figure 2.2 HRM impact on Performance logic

Source: Savaneviciene and Stankeviciute

Chand (2010) conducted a study on HRM practices in the Indian hospitality enterprises. Thestudy had a two-fold purpose: to investigate the importance of human resource management(HRM) practices and to investigate whether this set of HRM practices in the Indianhospitality enterprises depended on the demographic characteristics. A structured instrumentwas developed to examine the HRM practices. Based on a survey of fifty seven hospitalitymanagers‘ perceptions on HRM, practices were assessed by a twenty seven HRM practicesand five demographic variables. Factor analysis was performed to identify HRM practices,and one-way ANOVA was employed to test the association of the demographic variableswith HRM practices. Results indicated that the set of harmonized terms and conditions,formal manpower planning, flexible job description, formal system of induction,production/service staff responsible for their service, social appreciation and recognition mayconstitute the most important HRM practices in the Indian hospitality enterprises. Further, theresults revealed that there was a positive relationship between HRM practice variables andcategory and type of sample enterprises, but there was no relationship between HRM practicevariables and size and age (capital or employees).

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2.2 Innovative HRM Practices

Kossek (1987) offered six propositions that identify factors associated with the adoption ofinnovative HRM practices: 1. external environmental forces distinguish HRM innovations across industries; 2. structural organizational characteristics may be related to HRM innovations; 3. HRM innovations that are easily packaged and marketed by consultants may be the most widely diffused; 4. organizations often adopt HRM innovations in order to appear more legitimate; 5. strong culture firms may adopt HRM innovations for different reasons than weak culture firms 6. Finally, a company's history of success with past HRM innovations affects the prospects for acceptance of new ones. He concluded that companies adopted new work practices for a variety of, oftencontradictory, reasons.

Hays and Kearney (2001) organized the new directions in HRM into the traditional activitiesof staffing and selection, compensation, performance appraisal, labor relations and collectivebargaining, and job design. Their study was related to the state HRM, yet therecommendations were quite interesting and helpful. As per these researchers, evidentthroughout these activities were four broad themes of change: increased flexibility, greaterapplication of information technology, decentralization of operations, and a more strategicrole for state offices of HRM. They posited that significant retooling to develop new skillsand abilities would be required for that-day managers and a different set of expectationswould greet new hires. The focus on strategic HRM implied that HR managers would assumemore responsibility for information technology and management, consultation and oversightregarding agency personnel operations, implementing and managing new compensationprograms, learning new HRM software as it became available, developing best practices inHRM, managing diversity, and resolving conflict. The effective HR managers of the futurewould not be the traditional specialists, but rather those who could do multitasking. Theyadded that there was no doubt that, pressures from the external and internal environments ofhuman resource management would continue to provoke change and innovation.

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Gurkov (2002) conducted a study on innovations in HRM practices in Russia. In 1998, he

administered a survey to seven hundred forty Russian chief executive officers (CEOs), whichenabled him to raise the question of the current human resource management (HRM)practices in Russian industrial companies. In October–December 2000, he administeredanother survey among seven hundred thirty five Russian CEOs. That time he observed amajor drive towards some modern instruments of HRM policies. Especially changes wereseriously brought down in the recruitment and staffing policies. However, an additionalsurvey, devoted to the source of innovations in HRM, revealed that most HRM innovationswere implemented on a trial and error basis, without reference to international practices.Despite the need to implement new forms of HRM, personnel departments in Russianindustrial companies were mostly preoccupied with routine functions of personneladministration—performance appraisal, retraining, quantitative and qualitative planning ofthe workforce.

Marrewijk and Timmers (2002) outlined the most important trends in corporate socialpolicies, as far as they had implications for personnel policies. They concluded in their studythat in addition to the traditional personnel and human resource management (HRM), there isa need for a new approach to personnel management, which is called as Human CapitalManagement (HCM). HCM emphasised an alignment between the individual and theorganization and in their view, this offered the challenge and the key to successfulmanagement in the future.

Taylor and Walley (2002) designed a matrix to categorise the organisations as sleepers,doers, thinkers, strivers or leaders according to their strategic intent and new HR policyimplementation as shown in the figure 2.3. As per the study, ―sleepers‖ are the organisationswith no strategic intent and no new policy implementation. ―Doers‖ are those which are withno strategic intent but some new policy implementation. ―Thinkers‖ name had been given tothe organisations with strategic intent and no new policy implementation. The studycategorised those organisations as ―Strivers‖ which have strategic intent and new policyimplementation. However, the ―Leaders‖ are the ones which have strategic intent as well asnew policy implementation with HRM outcomes. According to the study, a form of―hijacking‖ of HRM is taking place- that is; new policies being brought in under the auspicesof HRM are being thwarted or circumvented in practice, either for conscious gain or because 38 REVIEW OF LITERATURE

of unconscious incompetence. The study also concluded that the young Croatian managerswelcomed the new and improved HR progressive practices and identified with most of thephilosophy of HRM, apart from suspicions associated with ―mindset control‖ aspects thatthey saw underpinning HRM and associated with the previous regime.

Figure 2.3 Categorising HRM in Croatia

Source: Taylor and Walley

Agarwala (2003) attempted to explore the extent of introduction of Innovative Human

Resource Practices. Twenty-one HR experts from across industry were interviewed in-depthduring this phase. The purpose was to understand the use of the term innovative in the contextof human resource practices, to identify HR practices to focus upon, to obtain examples ofinnovative practices. Based on the opinion of experts interviewed, it emerged that the term'innovative human resource practices' refers to a modification in the existing or establishedhuman resource practices of the organization, which is new to the organization as well asimproved, even if the modification is by way of adopting or adapting the human resource 39 REVIEW OF LITERATURE

study focused on understanding the changing role of human resource in achieving corporatetransformation in India. The study analysed the four aspects of HR relating to corporatetransformation – efforts to change mindsets for corporate transformation, change in HRpractices, change in HR role and triggers for change. Data analysis was done usingparametric and non-parametric tests. Findings of the study showed that training interventions,CEO interaction and other practices which trigger greater involvement like quality circles,total quality management appeared to have greater impact on mindset change in employees.In Indian organisations, HR practices like recruitment and selection, training anddevelopment, performance appraisal and manpower planning are taking place but they are nothappening up to the desired level of the employees. New HR techniques like assessmentcentre and 360 degree feedback were introduced in the organisations for talent managementbut they were not getting translated into the organisational system. For corporatetransformation, CEO support and high HR status were essential to change the mindsets in thecompany, whereas higher HR status and increased line support together help to bring changein HR practices. Thus, HR status was found to be a key factor to facilitate change inmindsets, change in HR practices as well as in creating a pro-change orientation in thecompany. The role of HR professional was changing to an above average extent. HRpractices like performance appraisal and training and development were being changed moreas compared to recruitment and selection and manpower planning. The focus was on trainingand development so as to build appropriate skills and mindsets among employees.

Organisations‘, to report on current developments in the area of human resource developmentin Australia. The objectives of the study were to examine whether the educational levels of 40 REVIEW OF LITERATURE

HR professionals increased continuously, to study the current key elements of HR role and tostudy Australian organisational policies and practices to attract the talent. The study exploredthe reactions of HR professional to possible changes in their role. The frequency data revealsthat only nine percent of respondents report no change in their role, 84 percent of respondentsagreed that they had to acquire a new set of skills in response to the transition from personnelto HRM. A total of 80 percent of respondents also claimed that the changes had made theirjob more rewarding. Results confirm that organisations are working to attract talent. Lowresponses were also identified in the areas of career management and development. Studyrevealed that organisations are giving importance to discussing and documenting employeeprogress both at management and non management level. Study indicates that quite lowattention is paid towards job design, job analysis and team building. The finding suggests thatorganisational structures are adapting and providing HR with an opportunity to participate atsenior level.

Radjamanogary (2006), in his article ―Globalization and its Impact on HRM in corporatesector‖, studied the impact of globalization on HRM Practices and discussed the restructuringof HRM practices in the context of globalization. He further added that, the HRM practices intoday‘s globalized era have to move beyond the boundaries of culture, geography, andlanguage. HRM practices such as training and development, performance appraisal,communication, etc., need to be restructured in order to develop the organisations.

Som (2006), tried to understand how innovative HRM practices were being adopted byIndian firms to brace competition in the post liberalization scenario with the help of elevenin-depth case studies conducted over a period of 5 years (1998-2003) in eleven large Indianorganisations in nine industries. According to this study, the liberalization of the Indianeconomy created a dynamic business environment that had resulted in hyper-competition. Toface this hyper-competitive environment, organizational adaptation and alternativeadaptations of innovative practices had been put in place by firms for survival and forsustainable corporate performance. This study attempted to examine how these Indian firmslike SBI, Arvind Mills, Infosys, Wipro corporation, Mehta group etc. had braced competitionthrough creative and innovative human resource management (HRM) strategies and practicesin the aftermath of liberalization of the Indian economy in 1991 and the HRM adaptationsthat had been relatively more effective in this dynamic context. Each organisation, a leader in 41 REVIEW OF LITERATURE

its respective industry, has undergone extensive restructuring process to equip itself for theimpending competition that arose due to the phased deregulation, liberalisation andprivatisation initiated by the Indian government in 1991. The focus of the research was tounderstand some of the innovative HRM strategies and practices that stem from functionallylogical strategic initiatives in response to a hypercompetitive, complex but opportunity-richenvironment that had opened up due to the economic liberalisation in India. A theoreticalframework of aligning effective innovative HRM strategies and practices for effectivecorporate coping in a competitive market had also been done in this study.

Konstantopoulos and Alexopoulos (2007) studied the HRM practices and its changes in theGreek dry-bulk shipping. They attempted to investigate the innovations in HRM beingadopted by them. This question began with the assumption that the changes, effectuated overthe last years in the human resources market of the Greek dry-bulk shipping, had given rise tothose conditions that were known during the redesigning of processes, or business structures,or while other kinds of business changes were taking place- with the general title of humanresource resistance to change. In other words, they assumed that whatever change happened,it could not be followed by the automatic changes of the cognitive mechanisms and thecorrelative automatization of behaviours in order for human resources to be directly adaptedto the new conditions. They found that the captains of dry-bulk ships dealt with the demandsof globalized market, either by using old-fashioned practices, or modern innovativeprocesses. Therefore, to generalise this result, they preferred the use of old as well as the newinnovative HR related processes wherever applicable.

Zheng et al. (2009) studied innovative HR practices in China. This study showed how theunderstanding of human resource management practices, which have been adopted in theemerging markets such as that in China, was particularly interesting to academia andmanagement practitioners. The main purpose of this study was to shed some light on theimplementation of innovative HR practices among seventy four Chinese small and medium-sized enterprises (SMEs) and to explain how the HR practices influence their firmperformance. According to this study, about 30 years‘ economic reform in China had ledmany changes in management practices at the enterprise level, including HR practices. Aconsiderable deregulation of the employment system had increasingly shifted staffingallocation by state agencies to enterprise-based recruitment and selection from the labour 42 REVIEW OF LITERATURE

market. The remuneration system had also been changed with more focus on motivation andcompensation mechanisms aimed at improving organizational efficiency and performancethan previous emphasis on social and economic egalitarianism (Zhu and Dowling, 2000;Warner, 2004; Ding et al., 2006). All such innovations needed to be analysed from differentpoints of views. The relationship studied in this paper was concluded in a figure 2.4 shownbelow:

Source: Zeng et al (2009)

Cluster analysis was used to group Chinese SMEs according to their adoption ofinnovative human resource (HR) practices and examine how the practices are associated withHR outcomes and firm performance. The results from the hierarchical cluster analysisindicated the existence of a three-cluster solution. The first cluster had a high representationof small firms that emphasize free market selection, performance-based pay and employeeparticipation. This group of firms had not yet implemented all of the innovative HR practices(e.g. training and development and performance evaluation). The second cluster consisted offirms that employed almost the full range of innovative HR practices. The third clusterconsisted of enterprises that emphasized more traditional personal management practices. Itwas found that the membership of clusters is influenced by several factors, includingownership, age and size of firms. These characteristics had influenced the motivation,capacity and ability of firms in the sample to adopt high performance human resource 43 REVIEW OF LITERATURE

practices. The extent to which firms had adopted innovative human resource practices wasshown to be closely associated with human resource outcomes and firm performance. Fromthe cluster analysis under this study, it was apparent that innovative HR practices amonggrowth-oriented SMEs in China include performance-based pay, training and development,performance evaluation, encouragement of employee participation in decision making andstrategic recruitment and selection. These were the practices adopted by the cluster of firmsthat were achieving the best HR outcomes and improved firm performance. Another keyimplication of this research was that domestic and collective owned enterprises (privatesector firms) that wish to improve their firm performance should focus on using the HRpractices that are more commonly adopted by the innovative firms (i.e. performanceevaluation, training and development, provision of social benefits), though they werepotentially more costly to adopt. State-owned enterprises (public sector firms) should alsofocus on implementing a wider array of innovative HR practices to improve growth potential.

Racelis (2009) mentioned in his conference paper that high performance work practicesinclude comprehensive employee recruitment and selection procedures, incentivecompensation and performance management systems, and extensive employee involvementand training. It has been argued that these practices can improve the knowledge, skills, andabilities of a firm‘s current and potential employees, increase their motivation, reduceshirking, and enhance retention of quality employees while encouraging nonperformers toleave the firm (Huselid, 1995).

Barman and Singh (2010) studied HR innovations out of recession by applying an

appreciative text analysis of existing literature. In this study an attempt was also made to findout the fulcrum of innovation in the referred literatures with the support of email survey.According to these researchers, ―Recession is about the creative Human ResourcesManagement. The HRM Function is asked to bring new ideas, to change the HRM processesand to develop or change the procedures. And this effort has to be cheap or it has to cut thecosts of the organization. The HRM Innovation is easy in times of the business growth, butthe recession is not good for big innovative HRM Initiatives.‖ Through analytical textmining, the researchers found out the basic contents for HR innovations those are extremelyrelevant to corporate context and then the contents were contextualized to bring to limelightof post crisis HRM scenario. The selected contents were finalized to verify in the post crisis 44 REVIEW OF LITERATURE

context; than framed as questionnaire which was used for the survey. The study confirmedthat the essential points, especially in post-recession period, are the ability to take a broaderview of the business and to articulate the impact of HR initiatives on the bottom line.

According to Mishra and Pallavi (2010), the companies are taking up people relatedinitiatives as there is a need to manage human resources advantageously, so as not to lose thecompetitive edge in talent that they have built. Innovative HR practices thus help in buildingcompetencies and capabilities of the workforce. In managing their human resources,companies had time and time again focused on values, invested in personnel, emphasized onmeritocracy and consequently attaining excellence in HR processes. Innovative HR Practicesby organisations can be witnessed, in recruitment and selection, reward and recognition,motivation, cost-cutting, training, performance appraisal, etc. Such HR practices have beensaid to be quite important so as to retain the best talent in an organization so as to cut the costin such a competitive environment.

Sharma et al. (2010) concluded in their article that, the modern HRM is striving to adoptstrategic HRM Practices such as open door policy, balanced scorecard, etc. HRM must followthe latest trends in order to improve the organisational culture.

Ayanda (2012) conducted a study on the innovative HRM practices in Nigerian bankingsector. The effect of innovative HRM practices on the financial performance of banks inNigeria was examined in this study. Results indicated that strategic integration anddevolvement of HRM were practiced to a moderate extent in the Nigerian banking sector.Findings also showed that innovative HRM practices as represented by innovative HRMalignment, documented HRM strategy, committee membership, line managementdevolvement and line management training had significant positive effect on firm‘s financialperformance. The study also recommended that organizations should pay more attention tothe implementation of innovative HRM practices with a view to improving the degree of theirimpact on firm‘s financial performance.

Jain et al. (2012) highlighted the extent to which innovative HRM practices were beingadopted by both Indian and foreign firms operating in India. Their research also examinedperceptions of Indian HR managers about ‗ideal‘ staffing practices. A mixed methodology 45 REVIEW OF LITERATURE

comprising of qualitative case studies and an on-line survey helped to address both theresearch questions. Three case studies were conducted to explore the different types ofinnovative HR practices prevalent among technologically intensive MNCs operating in India.A similar number of case studies were also conducted of Indian MNCs. The results showed adifference in the way the foreign firms see its human resource management innovations(HRMI) in contrast to the way Indian firms do. There was a greater emphasis on parentsubsidiary alignments in foreign MNCs something that Indian MNC had less as a concern. Asper the study, the Indian MNCs were clearly focused on managing performance from within,and had put in place innovative culture building practices. In contrast, foreign MNCsemphasised on keeping the balance between parent and subsidiary and looked for HRMIpractices from across their subsidiaries in various global areas. Foreign MNCs also tended tobe conscious of the cost and performance aspects more than Indian MNCs.

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2.3 Impact of HRM practices on performance

Dyer and Reeves (1995) reviewed much of the existing research on the relationship betweenHR practices and performance and proposed that measures of performance could be brokendown into four categories. First, employee outcomes dealt with the consequences of thepractices on employees such as their attitudes and behaviour, particularly behaviour such asabsenteeism and turnover. Organisational outcomes focused more on operational measures ofperformance such as productivity, quality and shrinkage, many or all of which would beprecursors to profitability. Financial/accounting outcomes referred to the actual financialperformance measures and include expenses, revenues and profitability. Finally, market-based outcomes reflected how the financial markets value a firm, particularly stock price orits variations.

Huselid (1995) examined the relationship between HR practices and corporate turnover,profitability, and market value. He surveyed senior HR executives in a sample of 968 publiccorporations in the United States, regarding the percentage of employees who were coveredby a set of HR practices he considered representative of a High Performance Work System(HPWS). After controlling for a number of variables, he found that his HR index wassignificantly related to the gross rate of return on assets (a measure of profitability) andTobin‘s Q (the ratio of the market value of a firm to its book value).

Macduffie (1995) tested two hypotheses using a unique international data set from a 1989-90survey of sixty two automotive assembly plants that innovative HR practices affectedperformance not individually but as interrelated elements in an internally consistent HR"bundle" or system; and that these HR bundles contributed most to assembly plantproductivity and quality when they are integrated with manufacturing policies under the"organizational logic" of a flexible production system. The survey data tested three indicesrepresenting distinct bundles of human resource and manufacturing practices. The analysis ofthe survey data supported both the hypotheses. Flexible production plants with team-basedwork systems, "high-commitment" HR practices (such as contingent compensation andextensive training), and low inventory and repair buffers consistently outperformed massproduction plants. Variables capturing two- way and three-way interactions among the

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bundles of practices were even better predictors of performance, supporting the integrationhypothesis.

Delery and Doty (1996) examined the relationship between HR practices and profitability ina sample of banks in the U.S. They identified three different ways of analysing the linkbetween HR practices and organizational performance, which they labelled as theuniversalistic, the contingency and the configurational approach. The universalistic approachfocused on the effectiveness of individual HR practices, irrespective of each other or thewider context, whereas the basic premise of the contingency approach was that HR policiesneeded to be in line with the context in which they operated to have beneficial effects. Theconfigurational approach focused on how ‗patterns‘ of HRM practices (rather than singlepractices) were related to dependent variables.

Delaney and Huselid (1996) studied the impact of HRM practices on the perceptions of theorganisational performance. The perceptions of the organisational performance weremeasured through two ways i.e. perceived organisational performance and perceived marketperformance. The perceived organizational performance measure comprised of productquality, customer satisfaction, and new product development. The perceived marketperformance variable focused more minutely on economic outcomes such as profitability andmarket share. In this study seven items provided a reasonably broad reflection of theprogressive HRM practices that were identified through the literature. This study was carriedout in five hundred ninety profit motive and non-profit motive firms from the NationalOrganizations Survey. The researchers found positive associations between human resourcemanagement (HRM) practices, such as training and staffing selectivity, and perceptual firmperformance measures. Results also suggested methodological issues for consideration inexamination of the relationship between HRM systems and firm performance.

According to Guest (1997), the expectancy theory of motivation provided one possible basisfor developing a more coherent rationale about HRM-Performance link. The theory proposedthat performance at individual level depended upon high motivation, possession of thenecessary skills and abilities and an appropriate role and understanding of that role. Thisconclusion was a motive to choose such HRM practices that encouraged skills, motivationand an appropriate role structure as only those HRM practices impact HRM outcomes. Thesefactors influenced behaviour outcomes, which translated into performance outcomes, whichthen resulted in financial outcomes.

practices using data from a sample of thirty six homogeneous steel production lines owned byseventeen companies. They gathered human resource management data by conductingstandardized interviews with HR managers, labour relations managers, operations managersof the finishing lines, superintendents, line workers, and union representatives in organizedlines. Supporting information was collected from personnel files, personnel manuals,collective bargaining agreements, and other primary source documents. They then, used thisinformation from the interviews and supporting documents to answer survey-type questionsabout the HRM practices and then to construct a detailed set of HRM dummy variables. Theevidence, derived from unique monthly panel data on productivity and HRM practices in ahomogeneous sample of production lines, showed that innovative HRM practices raisedworker productivity. The productivity regressions demonstrated that lines using a set ofinnovative work practices, which include incentive pay, teams, flexible job assignments,employment security, and training, achieved substantially higher levels of productivity thando lines with the more traditional approach, which included narrow job definitions, strictwork rules, and hourly pay with close supervision. Thus, the preponderance of the evidencesuggested that, in these steel finishing lines, innovative employment practices tended to becomplemented, as was proposed in the recent theoretical work on optimal incentivestructures.

between HR and business strategy, the largest bulk of research had been conducted at thecorporate level of analysis. A lesser amount of research had used the establishment level.Almost entirely ignored was research on the link between HR and performance at thebusiness unit level of analysis. Secondly, with regard to the types of performance outcomes,they found that very few studies had examined HR outcomes (three effect sizes examinedturnover), many had used accounting and financial market measures, and the largest numberof effect sizes was observed for organisational outcomes (productivity, quality, service etc.)

Anantharaman and Abdul (1999) also studied a relationship of HRM and organisationalperformance. An attempt was made to find the inter-correlation between human resourcemanagement practices and perceived organisational performance for executives and non-executives. Study showed that perceived organisational performance is positively related toemployment security, selection in recruiting, information sharing, employee participation andempowerment, self managed teams, training and development, cross utilization and crosstraining, symbolic, egalitarianism and wage compensation in the case of executives as well asnon- executives. Perceived organisational performance is not related to human resourcemanagement practices such as, high wages, incentive pay, employee ownership andpromotion within for managers. The results of investigation showed that executives and non-executives did not perceive the human resource management practices differently. Overall,the study supports positive relationship between HRM practices and perceived organisationalperformance (POP), thereby adding to the growing empirical evidence suggesting that peopleare preeminent resource and the key to outstanding performance.

Harel and Shay (1999) conducted a study on ‗The Effect of Human Resource ManagementPractices on the Perceptions of Organisational and Market Performance of the Firm‘. Thepurpose of the study was to examine the firm-level impact of human resource managementpractices. Human resource management practices like recruitment, selection, compensation,participation, and training were considered as independent variables. These were alsomeasured by using ranking scale. The results depicted that the correlation between twodependent variables – organisational and market performance was 0.67. The organisationswhich invest in training, base compensation on performance, encourage employeeparticipation, use the internal labour market for the purpose of recruitment and employeemobility had significantly higher organisational performance. The second dependent variable 50 REVIEW OF LITERATURE

- market performance was found to be related significantly to selection activities, training andcompensation. The single independent variable found to be statistically significant wastraining. In case of perceived market performance it was found that in addition to trainingpractices, employee selection practices also significantly affected the perceived marketperformance.

Wood (1999) reviewed the various studies on HR systems and performance and analysed theconceptual dimensions of the debate concerning HRM and performance. This showed that theissues go beyond a simple competition between universalism and contingency theory. Therewere more complicated hypotheses linking human resource practices beneath the surface ofthe recent literature. One part of the study also overviewed the studies in the light of thesehypotheses, revealing that they presented an uneven picture. Firstly, there were conceptualdifferences underlying the studies and, secondly, the results varied between them, and theeffects of HRM vary between performance measures even in particular studies. Though a fairnumber of the studies claimed to support universalism, their claims were not alwaysunequivocally supported by their research evidence, and it was premature to conclude in itsfavour, according to the researcher.

Amba-Rao et al., (2000) in an empirical study compared performance appraisal practices andmanagement values among foreign and domestic firms, which included three global Indiancompanies with two hundred thirty five managers. They suggested that managers oforganization needed to adapt selectively depending on the basis of ownership structure of anorganization. Their study also gave evidences of positive linking of Human ResourceManagement Practices with organizational performance.

Bartel (2000) extended the analysis of the relationship between the human resourcemanagement environment and establishment performance to the service sector by examiningthe branch operations of a large Canadian bank. A unique dataset collected through site visitswas created for this research project. The econometric analysis showed that, controlling forthe characteristics of the market in which the branch was located and the characteristics of thebranch employees, as well as unobserved branch-specific and manager-specificcharacteristics, the human resource management environment at the branch, as measured bythe quality of the performance feedback system and the quality of communications between 51 REVIEW OF LITERATURE

the manager and the staff, had significant effects on the branch‘s performance, especially itssales of loans. An important finding from this study was that, even though all managers inthis bank were given a formal set of human resource policies, they appeared to haveconsiderable discretion in their application. The evidence in this paper also supported thenotion that branch-level performance in the banking industry can be improved if managersundertake specific human resource management-related actions.

Boselie et al., (2001) aimed to test empirically the impact of eight HR practices on employeeperformance in a developing country: Indian commercial banks. This was crucial fordeveloping appropriate management practices. The increased probability of having to managein an international situation demanded the conduct of more comparative HRM research.Boxall, 1995; Budhwar and Debrah, 2001; Budhwar and Sparrow, 2002; Den Hartog andVerburg, 2004 also supported the same facts in their studies.

Fey and Björkman (2001) investigated the relationship between human resource management(HRM) and the performance of one hundred one foreign-owned subsidiaries in Russia. Thestudy‘s results provided support for the assertion that investments in HRM practices cansubstantially help a firm perform better. Further, different HRM practices for managerial andnon-managerial employees were found to be significantly related with firm performance.However, only limited support is obtained for the hypothesized relationship between effortsat aligning HRM practices with firm strategy and subsidiary performance.

Guthrie (2001) examined the impact of HR practices on turnover and firm productivityamong a sample of firms in New Zealand. He used performance data from 1996-97 but askedrespondents during that time to report the practices that existed during 1995-96. He noted thatHR practices had an impact on turnover, and that the relationship between retention andproductivity was positive when firms implemented high-involvement HR practices, butnegative when they did not.

Supangco (2001) studied the relationship between sophistication of HRM plan and perceivedorganizational performance; the relationship between sophistication of HRM plan and thedegree to which companies undertake practices with high strategic value; and the relationshipbetween strategic value of human resource activities and perceived organizational 52 REVIEW OF LITERATURE

performance. Her work focused on HRM systems that have great strategic value. Herfindings supported all the hypotheses that all three relationships were positive and significant.

Agarwala (2003) attempted to explore the importance of innovative human resource practicesfor organizational goal achievement and satisfaction with their implementation along withtheir association with organizational commitment. Results of the regression analyses showedthat the perceived extent of introduction of innovative human resource practices by theorganizations was the most significant predictor of organizational commitment. Thissuggested that higher the extent to which employees believed that innovations in HRpractices were important for achieving the goals of their organizations and the higher theextent to which IHRPs had been introduced by their organizations in their opinion, the higherwas their identification with the organization.

Ahmad and Schroeder (2003) investigated the effects of selective hiring, employmentsecurity, decentralization and use of teams, incentive and compensation, extensive training,status differences, and information sharing on organizational performance (quality, cost,flexibility, delivery and commitment). The study confirmed the positive and significantrelationship of HRM practices with firms‘ operational performance.

Collins and Clark (2003) explored the black box between human resources (HR) practicesand firm performance. Specifically, they examined the relationships between a set ofnetwork-building HR practices, aspects of the external and internal social networks of topmanagement teams, and firm performance. Results from a field study with seventy threehigh-technology firms showed that the relationships between the HR practices and firmperformance (sales growth and stock growth) were mediated through their top managers‘social networks. Their results also suggested that future strategic human resourcemanagement research should continue to examine employee-based and other firm capabilitiesthat may act as mediating links between HR practices and performance.

Cunha et al. (2003) studied the impact of HRM practices on organisational performance inEuropean companies. This study used structural equation modelling to test a model of theimpact of human resources management practices on perceived organizational performance,on a large sample of European companies. The survey was organized around six sections 53 REVIEW OF LITERATURE

compensation and benefits, employee relations and communications, and organizationaldetails. The influences of competitive intensity, industry attractiveness and strategicmanagement were considered in the model, and their direct and indirect influence onorganizational performance was assessed. The model produced an adequate fit and resultsshowed that strategic management did influence human resource practices. Human resourceflexibility practices and performance management had a positive impact on organizationalperformance, while training was not found to have a significant impact. A direct positiveimpact of competitive intensity and industry attractiveness on strategic management wassupported by the data, as well as a direct positive effect of industry attractiveness onperceived organizational performance.

Kaynak (2003) developed a structural equation model of potential effects of HRM and TQMon perceived financial, market and operating performances relative to the competition, whichwas tested on a sample of US manufacturing and service firms. In contrast to most studies,the model showed some integration between QM and HRM, for instance, managementleadership was a latent variable that loaded on HRM and quality management practices.Results supported all paths in the model, and the author concluded that a range of TQMpractices had positive effect on firm performance and thus practitioners as well as researcherscannot simply pick and choose a few techniques to implement.

Guest et al. (2003) explored the relationship between HRM and performance in three hundredsixty six UK companies using objective and subjective performance measures and cross-sectional and longitudinal data. Human resource management was measured through 48 itemsin the interview schedule for HR managers. They covered nine main areas of HRM:recruitment and selection; training and development; appraisal; financial flexibility; jobdesign; two-way communication; employment security and the internal labour market; singlestatus and harmonization; and quality. Using objective measures of performance, greater useof HRM was associated with lower labour turnover and higher profit per employee but nothigher productivity. After controlling for previous years‘ performance, the association ceasedto be significant. Using subjective performance estimates, there was a strong associationbetween HRM and both productivity and financial performance. The study therefore

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confirmed the association between HRM and performance but failed to show that HRMcauses higher performance.

Wright et al. (2003) examined the impact of HR practices and organisational commitment onthe operating performance and profitability of business units. They have examined therelationships of both HR practices and organisational commitment with various operationalmeasures of performance using a predictive research design. Employee attitude surveys wereconducted and related to subsequent performance measures collected in the three to nine-months timeframe after the survey data was collected. The sample consisted of 5,635respondents of fifty business units of a large food service corporation with operations in theUnited States and Canada. Employee respondents in each work unit were asked whether ornot nine specific HR practices existed for their job category (1 = ‗Yes‘, 2 = ‗No‘, 3 = ‗I don‘tknow‘). Five items were used from two different organisational commitment scales (Meyerand Allen, 1997; Porter et al, 1974). Six measures of performance were provided fromarchival company records. The results revealed that HR practices were strongly related toorganisational commitment. And finally both organisational commitment and HR practiceswere significantly related to operational measures of performance, as well as operatingexpenses and pre-tax profits.

Budhwar and Boyne (2004) studied the gaps between Indian Private and Public SectorHuman Resource Practices. They found that the gaps were not significant with respect tostructure of Human Resource Departments. Both Public and Private Sector organizations hadkey Human Resource Strategies like- recruitment and selection, pay and benefits, training anddevelopment, and employee relations but both the sectors adopted different approaches withrespect to few functional areas like compensation, training, and development. Researchersfinally stated that Private Sector organizations had more rational approach than their PublicSector counterparts.

Audea et al. (2005) examined the extent of adoption of human capital-enhancing humanresource (HR) and industrial relations (IR) practices. Differences between locally owned andother organizations in these practices and their relationship to firm performance were alsoinvestigated. Questionnaire responses were obtained from managers and unionrepresentatives from one hundred twenty eight organizations located in the Philippines. The 55 REVIEW OF LITERATURE

results indicated that there was, on average, a fairly high level of adoption of practicesconsistent with a strategic approach to human resource management (HRM), with foreign-owned firms tending to show a slightly higher level of adoption of such practices. A scalerepresenting the adoption of a more conciliatory and union-friendly IR approach was found tobe a significant predictor of perceived firm performance. Surprisingly, the level of strategicintegration between HRM and business planning and most human capital-enhancing HRpractices was not significant predictor of perceived firm performance.

Datta et al. (2005) included two primary perspectives to study the impact of HRM practiceson firm effectiveness. A universal approach and a contingency approach were used to modelthe link between the HRM and firm effectiveness. Those using the universal approach hadposed a positive relationship between ‗Best practice‘ HRM and firm performance. In contrast,the contingency model had proposed that the extent (or even direction) of the effect of theHRM on the firm performance would depend on the firm‘s environmental conditions. Thisstudy also observed significant contingency effects, with industry characteristics influencingthe degree of the high performance of the HRM practices impact on labour productivity.

De Grip and Sieben (2005) analysed whether employees and firms are differently benefittedfrom particular human resource (HR) practices. The focus of this study was mainly on smallfirms that might be badly informed on the impact of HR practices on firm performance. Inthis study on Dutch pharmacies, it was found that firms did not reward employees‘ skillsaccording to their contribution to firms‘ productivity, as (1) employees were over-rewardedfor their sector-specific skills and under-rewarded for the productivity enhancing effect oftheir computer skills and (2) employees‘ work experience positively affected their wages butdid not have real productivity effects. Moreover, it was found that training employees in caseof vacancy problems seemed to be an adequate HR practice, since it increased productivitywithout affecting the average wage level. The opposite held for offering higher wages tonewly recruited employees. Furthermore, it was also found that only the employees werebenefitted from performance evaluation interviews, whereas employing many employees bytemporary contracts appeared to have a negative effect on productivity, without affecting thewage level.

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In a study of managers from Taiwan and Cambodia, Sang (2005) concluded that workforceplanning; staffing; compensation, and incentives; teamwork; training, and employee securityhad a positive and significant influence on non-financial and financial dimensions oforganizational performance. The study validated the positive effects on operationaldimensions of performance, namely, production flexibility, product cost, product quality, andproduct delivery.

Wall and Wood‘s (2005) analysis of twenty five leading studies focusing on human resourcemanagement and performance showed that twenty one were purely cross sectional and manyused subjective performance measures. Two studies (Guest et al., 2003; Huselid et al., 1997)were described as ―quasi-longitudinal,‖ relating use of the practices at a given point of time tochange in company performance from a prior occasion to a subsequent one (as was the casefor Patterson et al., 2004). They also identified a number of methodological priorities forhuman resource management research that apply equally to the current concerns. In additionto stressing the need for studies that span other areas of management, they argued that first,independent measures of organizational performance (i.e., from financial accounts) should beused. Second, studies should have large samples, to improve generalizability and ensuresufficient power, especially in the testing of interaction effects. Third, use should be made oflongitudinal designs involving the repeated measurement of performance before and after theintroduction of practices.

Biswas et al. (2006) analysed the several factors which have vital impact on individualperformance and organisational effectiveness, during post-liberalization period. Theparticipants of the study were managerial executives from nine different firms in India. Datawere collected from three hundred fifty seven participants from which one hundred eightybelonged to the manufacturing sector, whereas one hundred seventy seven were from servicesector organisations. From results, it was found that organisational culture, as well asorganisational structure was significantly correlated with HR practices. At the same time HRpractices were significantly correlated with employee performance, as well as organisationaleffectiveness respectively. The causal relationships between the variables in the model weretested by using regression analysis. The regression estimates for the key variables showedthat the organisational culture had a significant impact on HR practices. Organisational

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structure also had a significant effect on general employee performance and organisationaleffectiveness.

Collins and Smith (2006) developed and tested a theory of how human resource practicesaffect the organizational social climate conditions that facilitate knowledge exchange andcombination and resultant firm performance. A field study of one hundred thirty sixtechnology companies showed that commitment-based human resource selection, trainingand development, and incentive practices were positively related to the organizational socialclimates of trust, cooperation, and shared codes and language. In turn, these measures of afirm‘s social climate were related to the firm‘s capability to exchange and combineknowledge, a relationship that predicted firm revenue from new products and services andfirm‘s sales growth.

Lambooij et al. (2006) conducted a study and addressed the question as to whether thelinkage between HRM and organisational performance could be explained by the effect of theinternal and strategic fit of HRM on the cooperative behaviour of employees. They were ofthe viewpoint that the more HRM practices were aligned within themselves (internal fit) andthe more HRM was aligned with an organisation‘s strategy (strategic fit), the betteremployees knew what was expected of them, and the more they behaved cooperativelytowards their co-workers and towards their supervisor. For this, they hypothesised that thecooperative behaviour of employees was positively related to the financial and non-financialperformance of the organisation. These hypotheses were tested using multilevel regression. Itwas found in this study that cooperation with co-workers was negatively related to turn overand positively related to sick leave. No support was found, however, for the hypothesis that abetter internal and strategic fit led to more cooperative behaviour on the part of employees.

Legge (2006) discussed how to measure the outcomes of Human Resource Management. Heused following measures for the same:  Financial outcomes measured as profits, sales and market share;  Organizational outcomes measured such as productivity, quality and efficiency; and

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 Human Resource related outcomes measured with the help of attitudinal and behavioural impacts on employees such as- satisfaction, commitment and job satisfaction. Different studies supported the use of these measures at different points of time.

Shahnawaz and Juyal (2006) explored and compared various HRM practices in two differentorganizations—consultancy/research based organization and fashion industry. This study alsoaimed at assessing how much of commitment in the two industries could be attributed toHRM practices. HRM practices were measured in terms of attitude towards HR department,hiring practices, training and development practices, performance appraisal practices, paypractices, and overall assessment through a scale of 75 items. The organizational commitmentwas measured by 18 items scale 6 each on affective, continuance and normative commitment.Data were analyzed by t-test and multiple regressions. HRM practices were foundsignificantly different in two organizations and mean scores on various HRM practices werefound more in the fashion organization. Regression results showed that various HRMpractices were significantly predicting organizational commitment in two organizations andalso when they were combined. Performance appraisal and attitudes towards HRMdepartment were the significant predictors of organizational commitment in the both theorganizations.

Sels et al. (2006) conducted a study with the purpose to develop and test a conceptual frame-work linking HRM to financial performance that fits small businesses. The central questionof the study was whether the development of an intensive HRM is profitable for smallerorganizations. Using structural equation modelling, they studied the mediating effect ofvoluntary turnover and productivity on the relationship between HRM intensity and one yearlagged financial performance. The results showed both productivity and profitabilityenhancing effects as well as a cost increasing impact of HRM intensity. It was concluded thatHRM intensity had a strong positive effect on productivity and, through this productivity, asqueezing effect on personnel costs/value added. However, this effect was not strong enoughto compensate for the cost increases which HRM intensity involved. On the other hand, thetotal effect of HRM intensity on profitability was positive and very strong. This effect couldbe explained by the positive impact of HRM intensity on some non- measured operationalperformance outcomes such as a lower level of disputes, better quality and/or more 59 REVIEW OF LITERATURE

innovation. Another observation was that the positive impact of HRM intensity onprofitability was not at the expense of a deteriorated solvency and liquidity score.

Tessema and Soeters (2006) examined how, when and to what extent HR practices affectperformance at the employee level. As performance is a multi-faceted and complicatedconcept, HRM outcomes were used as mediating factors between HR practices and employeeperformance. The data was collected from civil servants in Eritrea, Africa‘s youngest andpoorest country. The questionnaire administered for this study contained eight HR practices,which included: recruitment and selection practices, placement practices, training practices,compensation practices, employee‘s performance evaluation practices, promotion practices,grievance procedures, pension programme (social security). Their results demonstrated astrong HRM–performance link in the Eritrean civil service. In the authors‘ opinion, it can beconcluded that if the civil service organizations in developing countries like Eritrea were ableto successfully implement HR practices, they could achieve the maximum contribution oftheir employees, although, at that time, the economic and political environment within whichHR practices operate was not that conducive. These ﬁndings highlighted the situation of mostof the developing countries.

Wright and Nishii (2006) examined some of the mediating processes that might occur inHRM-Performance relationship by examining the relationship at multiple levels of analysis.They presented the model that included intended HR practices, actual HR practices,perceived HR practices, employee reactions and performance. According to the model, theactual HR practices exist objectively and must be perceived and interpreted subjectively byeach employee. Thereby, the perceived HRM practices and employee reactions were twoindividual level variables that were central to causal pathways and core to the ―black box‖opening. Based on the perceived HR practices, employees would react in some way, whichimpact organizational performance.

Andersen et al. (2007) studied the effect of SHRM practices on perceived firm financialperformance. ‗Strategic HRM alignment‘ with business objectives and strategies wasmeasured by 10 items, each rated on a 5-point scale. Four items were developed to measure‗Perceived firm financial performance‘: 1) return on equity (ROE), 2) return on assets(ROA), 3) market growth, and 4) profitability. The survey research findings indicated that 60 REVIEW OF LITERATURE

strategic integration and devolvement of HRM were practised to a moderate extent in thefirms sampled. The study also found evidence for a positive relationship between the degreeof strategic alignment of HRM with business strategies and a perceptual measure of firmfinancial performance.

Chand and Katou (2007) conducted a study on hotel industry of India with a two-foldpurpose: to investigate whether some specific characteristics of hotels affected organisationalperformance in the hotel industry in India; and to investigate whether some HRM systemsaffected organisational performance in the hotel industry in India. A total of four hundredthirty nine hotels, ranging from three-star to five-star deluxe, responded to a self-administeredquestionnaire that measured 27 HRM practices, five organisational performance variables,and ten demographic variables. Organisational performance was measured with sales growth,productivity, profitability, goal achievement, and good service quality, in the form ofperceived opinions of the survey respondents. Factor analysis was performed to identifyHRM systems and the HRM practice items were factored into six factors. One-way ANOVAwas employed to test the association of the demographic variables with organisationalperformance, and correlation analysis was used to test the relation between HRM systems andorganisational performance. The results indicated that hotel performance was positivelyassociated with hotel category and type of hotel (chain or individual). Furthermore, hotelperformance was positively related to the HRM systems of recruitment and selection,manpower planning, job design, training and development, quality circle, and pay systems.

Fey et al. (2007) investigated the extent to which different human resource managementpractices (HRMP) worked better in different companies of Russia, USA, and Finland. Theyalso tried to open up the black box between HRM practices and firm performance byconsidering how HRMPs affected firm performance. Training, appraisal, promotion,compensation and communication were the five HRM practices included in this study. Thestudy utilized a unique data set consisting of subsidiaries of two hundred forty one companiesoperating in Russia, USA, and Finland. In the partial least square analysis used to examinethe hypotheses, they demonstrated that different systems of HRMPs were preferable indifferent countries. It was also found that the motivation and ability were important mediatingvariables in the HRMP-performance relationship.

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Simon (2007) presented a quantitative case study of a large financial services organizationand explored the possible links among HR and individual and business unit levels ofperformance. Though being highly exploratory, the study raised a set of issues that mightchallenge some of the SHRM well-established statements such as the assumption of a direct,linear relationship between HR practices and business results, or the use of financial ratios assuitable indicators of the efficiency of people management practices. A set of correlation andmultivariate discriminant analyses were carried out using a number of general human capitalvariables and a set ‗lagging indicators‘ of HR policies and performance levels usingindividual productivity, adequacy, potential, branch financial performance and customerrelationship quality as grouping variables. As regards this study, the existence of moderatecorrelations between several measures of individual and business unit performance indicatedthat these variables were not completely independent. However, the weakness of their linearrelationship would limit HR capability to directly influence this level of firm results, andtherefore the HR function should search for alternate measures, closer to its very own natureand functioning. The results of the discriminant analyses supported a SHRM model in whichHR practices were not directly influencing firm performance, but rather having an impactthrough their combination with a pool of human capital characteristics not clear yet at thispoint of the research. At the same time, some individual performance measures did not showa direct impact over unit analysis.

Stavrou et al. (2007) explored the HR-performance relationship within the European Unionthrough Kohonen‘s Self Organizing Map (SOM). It provides a visual representation of therelationships that exist in the original data, while avoiding creating artificial clusters. Itfocused on the connection between human resource management as a source of competitiveadvantage and perceived organizational performance in the European Union‘s private andpublic sectors. While practices in these two sectors did not differ significantly, three diversebut overlapping HRM models did emerge, each of which involved a different set of EUmember states. Training & Development practices were strongly related to performance in allthree models and Communication practices in two. These results showed the usefulness of aninnovative technique, when applied to research, so far conducted through traditionalmethodologies, and brought to the surface questions about the universal applicability of thewidely accepted relationship between superior HRM and superior business performance.

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Altinay et al. (2008) seek to evaluate the relationship between the growth and the humanresource management (HRM) practices of small service firms in catering to professionalservices and the retailing sectors in the UK. The study reported and analysed the findings of196 face-to-face structured interviews with small service business owners. Findingssuggested that employee empowerment contributed to the sales growth of small firms in thedifferent sectors of the service industry. The study also showed that employee training andrecruitment, through formal channels, contribute to the sales growth of firms operating in thecatering sector. This study also argued that contextual variables – the extent of thecompetition and the availability of the workforce – had a bearing on the HRM practicesemployed by small service businesses.

Birdi et al. (2008) studied the impact of HRM and operational management practices oncompany productivity in UK. According to them, within the strategic human resourcemanagement (SHRM) perspective, empowerment, extensive training, and teamwork, wereseen as vital to sustained competitive advantage. They investigated the relative merits of thequality management, just-in-time, advanced manufacturing technology, and supply-chainpartnering practices through a study of the productivity of three hundred eight companiesover 22 years, during which time they implemented some or all of these 7 practices. The datawere analyzed by hierarchical linear modelling (also known as multilevel modelling) becauseof its natural two-level structure. They hypothesized that the introduction of each of the threeSHRM practices and each of the four operational manufacturing management practiceswould independently promote company productivity. That was supported for the SHRMpractices of empowerment and extensive training, but not for teamwork. Consistent withSHRM theory they also found performance benefits from empowerment and extensivetraining, with the adoption of teamwork serving to enhance both. However, none of the fouroperational practices of total quality management, just-in-time, advanced manufacturingtechnology, or supply-chain partnering showed a significant effect. None of the operationalpractices were directly related to productivity nor did they interact with other practices inways fully consistent with the notions of integrated manufacturing or lean production.

Gooderham et al. (2008) studied the relationship between HRM practices and perceived firmperformance of European firms. The impact was analyzed in 3,281 firms located in EuropeanUnion countries using data derived from the Cranet data set. 80 different HRM practices were 63 REVIEW OF LITERATURE

taken in this study. A factor analysis of these HRM practices resulted in 15 bundles of HRMpractices which were then further categorized as being either ―calculative‖, ―collaborative‖ or―intermediary‖. While controlling for contingency factors, firm strategy, firm size, marketconditions and degree of unionization, as well as controlling for industry and country, theresulting analysis indicated that while five of the six calculative practices and two of the threeintermediary practices had a significant impact on performance none of the six collaborativepractices had. Significantly it was further noted that the overall effect of HRM onperformance was relatively modest.

Jones et al. (2008) presented a few empirical evidences on the nature and effects of humanresource practices (HRM) in the Finnish manufacturing sector. In the analysis, they used thenovel survey on HRM practices, based on a representative random sample from thepopulation of the Finnish manufacturing firms which had fifty or more employees in 2005.To study how HRM practices affect the level of firm productivity, they first combined theHRM survey data with financial statement data and then estimated cross-sectional and paneldata estimators for the Cobb-Douglas production functions. It was found that both theincidence of employee participation practices and the incidence of HRM tools had increasedin the manufacturing sector from 2002 to 2005. The empirical findings also supported theview of a positive association with the HRM practices and the level of firm productivity.Perhaps more importantly, however, major finding was that not all forms of employeefinancial and decision-making participation practices had favourable productivity effects;consultative committee and profit sharing scheme had a positive effect, but other practicesdid not have statistically significant effects.

Katou (2008) measured the impact of HRM on organisational performance in the context ofGreece. Data were collected from one hundred seventy eight organisations using aquestionnaire survey in the Greek manufacturing sector, and analysed using the ‗structuralequation modelling‘ methodology. The results indicated that the relationship between HRMpolicies (resourcing and development, compensation and incentives, involvement and jobdesign) and perceived organisational performance was partially mediated through HRMoutcomes (skills, attitudes, behaviour), and it was influenced by business strategies (cost,quality, innovation). The study emphasized that HRM policies associated with businessstrategies would affect organisational performance through HRM outcomes. 64 REVIEW OF LITERATURE

Rizov and Croucher (2008) empirically examined the relationship of HRM practices andorganizational performance in European firms. They found that collaborative form of HRMpractices characterized by valuing employees as assets and core partners, creating andcommunicating a culture of partnership between employer and employees as well as amongemployees, communicating organization‘s mission, values, goals and strategy statementthrough explicit open communication policy and strong support for employees consultativebodies like unions and committees reflected positive and statistically significant associationwith firms‘ performance.

Shahzad et al. (2008) examined the relationship between three HR practices i.e.compensation, promotion and performance evaluation and perceived employee performanceamong university teachers in Pakistan. As per the study, these three practices which have arelatively direct impact on financial earnings and social status of an individual might beconsidered the major determinants of employee‘s performance. The results of the studyindicated a positive relationship between compensation and, promotion practices andemployee perceived performance while performance evaluations practices were notsignificantly correlated with perceived employee performance. The study concluded that thePakistani universities needed to revise compensation practices and define clear career paths toenhance the performance of teachers.

Simon and Martin (2008) intended to open new avenues for research under implementation-based approach. In an exploratory analysis, they proposed and tested a type of measure, theintensity of HR practices implementation at the individual level, that had been barely used inthe HRM-performance literature (Boselie et al, 2005; Paauwe and Boselie, 2005; Dorenboschand Van Veldhoven, 2006). For this purpose, they worked over the complete ERP-baseddatasets of two companies from different industries (banking and IT) which comprised thequantification of the impact of a set of HR practices on an individual employee level. Theirfindings showed that relevant variability differences existed at the implementation levelacross companies.

security; (2) selective hiring; (3) self-managed teams and decentralization of decisionmaking; (4) compensation policy; (5) extensive training; and (6) information sharing. Thefood managers in Greece were surveyed and their perceptions on HR practices and theirrelation to firm performance were recorded. Results provided overall support for all HRpractices except job security. Selective hiring was found to be a key practice that improvedorganizational performance. Compensation policy, information sharing, decentralization ofdecision making and extensive training were significant predictors for all performancevariables.

Yeganeh and Su (2008) carried out a study to analyze HRM practices in public sector of Iranin view of underlying cultural, political and economic factors. The study involved in-depthinterviews with four Iranian managers and data collected from eighty two respondentsthrough Likert-type questionnaires. The findings of the study shed light on the main HRMfunctions in the Iranian public sector. They focused only on four main HRM functions:staffing, training, compensation and appraisal. These four functions included the core ofHRM and conceptually they were relevant in the case of this investigation. Staffing wasmarked by pervasiveness of networking, entitlement, compliance with Islamic/revolutionarycriteria and high job security. Compensation was described by features such as fixed pay,ascription/seniority-based reward, and hierarchical pay structure. Training and developmentprograms were found to be unplanned and spontaneous. Finally, the paper showed that theappraisal function received little attention and tended to be based on subjective andbehavioural criteria.

Dimba and K‘Obonyo (2009) studied linked strategic human resource (SHRM) practices,cultural orientations, employee motivation and firm performance in foreign manufacturingmultinational companies (MNCs) in Kenya. One of the objectives of this study was toestablish the relationship between SHRM practices and firm performance. The respondentswere HR managers, financial managers and production managers, and non-managementemployees working in fifty foreign MNCs. Data were collected using questionnairesdeveloped by Hofstede and Huselid and modified by the researcher. The findings of the studyindicated that all the variables of SHRM practices, except recruitment and hiring, werepositively and significantly correlated with performance of the firm.

oriented, and reward-oriented human resource management (HRM) practices affected thelikelihood of affective and continuance commitment profile membership. They described thenature of the psychological states believed to underlie the specific profiles under investigationand then tested a series of theoretical predictions concerning the link between HRM practicesand the likelihood of profile membership. Predictor and criterion data for this study werecollected from three hundred seventeen respondents working in a variety of Canadian-basedorganizations. Their findings suggested different ways that organizations could use HRMpractices strategically to help shape the nature of overall employee commitment.

Racelis (2009), in his study, focused on studying the relationship between rewards andrecognition practices and firm performance, as well as between recruitment and retentionsystems and firm performance, using a survey instrument for traditional HRM activities(recruitment, selection, performance management, training, compensation, and employeerelations) and using independently collected organizational performance data focusing onfinancial performance (assets, capital, deposits, and return on equity). The sample had beenrestricted to the Philippine banking industry. The results for thirty three banks providedmodest evidence for the positive, significant relationship that existed between financialperformance and such HRM practices as recruitment from topnotch schools, administeringemployment tests, assistance in career planning, and offering opportunities for professionalgrowth. Among the control variables having a link with HRM and organizationalperformance, bank size turned out to have a significant positive relationship with bank assets,bank capital, and deposits. This result seemed intuitive, as the size of the operation waspractically endogenous to the equation that has assets and capital as dependent variables.Along with bank size, assistance in career planning and offering opportunities forprofessional growth turned out to be highly correlated to financial performance. This mightbe explained by the possibility that bank size exerted a mediating influence in the impact ofrewards and recognition, training programs and performance-based evaluations on bankperformance. Likewise, private banks seemed to exert a mild influence on the HumanResource-Firm Performance relationship.

Vermeeren et al. (2009) conducted a study with an aim to gain insight into the relationshipbetween HRM and the quality of public service in order to help public organizations improve 67 REVIEW OF LITERATURE

their performance by means of better HRM policies. For the analysis two different data baseswere used. The data bases provided them with data about employee well being and data aboutthe performance of municipalities. The data of both surveys were aggregated on theorganizational level, with the result that data could be compared among thirty five differentmunicipalities in the Netherlands. Structure equation modelling was used for establishing thisrelationship. Based on the secondary data analysis both hypotheses were confirmed, showingthat a) in organizations with a more performance oriented HRM system, employees had amore positive attitude and behavior towards their job and b) organizations in whichemployees showed a more positive attitude and behavior towards their job would reach betterorganizational public service performance. However, the effect of job satisfaction seemed tobe somewhat ambiguous. More satisfied employees seemed to have a negative influence onorganizational performance in efficiency terms (waiting time increase), but a positiveinfluence on customer satisfaction with respect to service delivery (customers‘ satisfactionwith respect to employee‘s empathy increase). In the context of New Public Managementboth performance indicators were persuaded.

Baloch et al. (2010) studied the HRM practices in banking sector of Pakistan with the aim tomeasure the impact of three HR practices i.e., compensation practices, promotion practicesand performance evaluation practices on perceived employee performance. Data wascollected through time tested questionnaire from public and private sector bankers of NWFP,Pakistan. Pearson Correlation and Multiple Regression were used for measuring the impact ofHR practices on perceived employee performance. The results of correlation indicated asignificant relationship between compensation practices and perceived employeeperformance, promotion practice and perceived employee performance and performanceevaluation practices and perceived employee performance. Multiple regression analysisshowed that 57% percent of the variance in perceived employees' performance can beaccounted for by compensation practices, employee evaluation practices and promotionpractices, concluding that the relationship between these variables exist to a good level. Thisstudy recommended that the private and public sector banks should pay special attention tothese three HR practices in order to ensure bankers' performance.

study was to assess the impacts of HRM practices developed in Swiss SMEs upon thecommitment of knowledge workers. Using data from a survey of over 198 knowledgeworkers, this study showed the importance of looking closer at HRM practices and,furthermore, to really investigate the impacts of the different HRM practices on employees‘commitment. Results showed that organizational support, procedural justice and thereputation of the organization might clearly influence knowledge workers‘ commitment,whereas other HRM practices such as involvement in decision making, skills management oreven the degree of satisfaction with pay did not have any impact on knowledge workers‘commitment.

Katou and Budhwar (2010) studied with the purpose of investigating the HRM-performancecausal relationship in the Greek context. This was an empirical research based on a sample oforganisations operating in the Greek manufacturing sector. Using structural equationmodelling, the results of the study revealed that the ability to perform (resourcing anddevelopment), motivation to perform (compensation and incentives), and opportunity toperform (involvement and job design) HRM policy domains were moderated by businessstrategies (cost, quality, innovation). Additionally, the motivation to perform was furthermoderated by managerial style and organisational culture. Further, the results indicated thatthe impact of HRM policies on organisational performance was fully mediated by employeeskills, attitudes, and behaviour. The study also concluded that although the motivation toperform HRM policy domain caused organisational performance, through employee attitudes,it might be supported that organisational performance positively moderated the effectivenessof this HRM policy domain, raising thus the question of reverse causality.

organizational performance in Oil and Gas Industry in Pakistan. A total of one hundred fiftymanagers of twenty randomly selected firms from Oil and Gas Industry responded to self-reported questionnaire that measured five HRM practices namely; training and development,recruitment and selection, compensation and reward, performance appraisal, and employeerelation. The effects of these practices on subjective measures of performance (productquality, productivity efficiency and overall perceived performance compared to industryaverage) were examined thereon. The researchers used financial and non financial metrics tomeasure organizational performance. The financial measures include profit, sales, and market 69 REVIEW OF LITERATURE

share. Non-financial measures include productivity, quality, efficiency, and the attitudinaland behavioural measures such as commitment, intention to quit, and satisfaction (Dyer &Reeves, 1995). Factor analysis was performed to identify human resource managementpractices. Mean scores and standard deviations were used so as to know the extent to whichthese practices were concurred in these firms. Regression analysis indicated a positive andstatistically significant association of these practices with organizational performance. Theresults of this study concluded to the remark that the organizations need to proactively pursuea strategic approach to HRM practices and invest in such practices to achieve sustainablecompetitive advantage in tangible and intangible dimensions.

Lee et al. (2010) investigated the relationship between human resource management (HRM)practices, business strategy and firm performance in Taiwan. They examined the followingHRM practices: training and development; teamwork; compensation/incentives; HRplanning; performance appraisal; and employment security. Two hundred thirty six managersworking at steel firms in Taiwan were surveyed to explore their perceptions on the impact ofHRM practices and business strategy on firm performance. The results of this study showedthat the HRM practices were positively related to firm performance and found that thereexisted a close linkage between HRM practices and business strategy. The study alsoconcluded that business strategies were positively related to firm performance. Anotherconclusion of this study was that integrating HRM practices with business strategies werealso positively related to firm performance.

Menezes et al. (2010) reviewed the literature on the association between lean production andperformance. From this, propositions on the integration and evolution of operation andhuman resource management practices associated with the lean production concept weredeveloped. Using 24 years of data on the use of seven core OM and HRM practices in Britishmanufacturing firms, the potential link between integration in the use of practices andproductivity was tested. In each year, three latent clusters were identified via orderedrestricted latent class models. The cluster, that consistently made a more integrated use ofpractices, outperformed the others. Furthermore, the longitudinal nature of the data permittedthe researchers to model the growth curves of each practice in the sample, recognizing anysimilarity in growth and investigating whether or not an early integration in adoption ofpractices was associated with higher final productivity. The results showed that pioneers were 70 REVIEW OF LITERATURE

more productive, thus suggesting that the head start in integrating core OM and HRMpractices associated with the lean production concept had paid off.

Tsai et al. (2010) were of the view that most research on the associations betweenorganisational performance, employee attitudes and Human Resource Management (HRM)practices had adopted a theoretical framework that proposed that HRM practices led to HRoutcomes (e.g. job satisfaction, skills, etc.) which in turn affected organisational performance.Therefore they conducted a study that developed and tested an alternative view of theassociation i.e. performance-attitude-HRM relationship. This model depicted the influence oforganisational performance on employee attitudes and the role of HRM practice as a mediatorbetween the two. It was tested using data collected from employee surveys and managementinterviews in thirty two small firms. The results suggested that employees in firms with betterbusiness performance have more positive attitudes towards three attitude measures (overallperceptions of work, job autonomy and the perceived link between reward and performance)and that the association between business performance and employee attitudes is partiallymediated by HRM practices. The results also indicated that the association betweenperformance and the attitude was contingent on HRM practices; that is, the way firmperformance influenced employees' overall perceptions of work was by the use of HRMpractices.

Qureshi et al. (2010) conducted a study to find out the relationship between ‗HRM Practices‘and the ‗Financial Performance of Banks‘. As a sample, forty six scheduled banks of Pakistanwere contacted, of which 38 responded. Human resource managers from different banks werecontacted for information collection regarding perceived financial performance of the banksand human resource management practices. The HRM practices selected for the researchstudy were selection, training, performance appraisal system, and compensation system andemployee participation. Empirical evidence was calculated through stepwise regressionanalysis, Pearson correlation and descriptive statistics to support theoretical models that linkHRM practices with financial performance of banks. The study concluded that all testedvariables have a positive relation and impact on financial performance of banks but the majorcontributory practices are selection, training, compensation and employee participation. Thisresearch study explored the same results produced by Qureshi et al. (2007).

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Savaneviciene and Stankeviciute (2010) defined the ―Black box‖ problem of HRM andorganisational performance. The study provided an overview of a number of conceptualmodels (Becker, Huselid, Pickus, Sprat, 1997; Guest, 1997; Purcel, et. al., 2003; Wright,Nishii, 2006) that attempted to depict the processes through which HR practices ultimatelyimpact organization financial performance. Assuming that the similarity among all of thesemodels was that they all had their basis in a linear causal process, the study looked into twoadditional aspects: first, the number of boxes in the ―black box―; second, the content of eachbox. This ―Black box‖ is the little knowledge of the mechanisms by which HR practicestranslate into competitive success. The quantity of boxes is the number of mediating variablesbetween the primary independent and dependent variables and the content of each box ischoosing a level of specificity within each box. The study summed up regarding the quantityand content of each box that putting too many boxes in the model will not open the ―blackbox" and putting too much items in the boxes will not make the model more insightful.

Teamwork, development, reward and participation were referred as the HRM practices in thestudy by Adnan et al. (2011). The research question of this study was whether each HRMpractice in Malaysian R&D companies positively related to financial performance or not.This study found that two HRM practices, namely participation and reward to be significantlyand positively related to financial performance. These findings suggested that firms whichplaced high importance on or carried out participation and reward practices in managing theirR&D professionals are more likely to experience better financial performance. However,training and development practices had significant but negative relationship with financialperformance. This finding suggested that the more the R&D firms emphasized on trainingand development practices particularly through providing extensive training programs todevelop competency and requiring them to attend trainings within or beyond their specialties,the lower the firms‘ tendency to improve financial performance. Another contradictoryfinding was observed in the relationship between teamwork and financial performance. Theresult showed that encouraging or requiring R&D professionals to work in teams did not havesignificant impact on financial performance.

Guest (2011) reviewed the progress in theory and research about human resourcemanagement and performance by identifying a series of phases in the development ofrelevant theory and research. He set out a number of challenges for the future on issues of 72 REVIEW OF LITERATURE

theory, management processes and research methodology. The main conclusion from thereview was that after over two decades of extensive research, the core questions about therelationship between human resource management and performance were still unanswerable.This was largely attributed to the limited amount of research that was longitudinal and hadbeen able to address the linkages between HRM and performance and to study themanagement of HR implementation.

Mahmud and Idrish (2011) empirically evaluated six Human Resource (HR) practices(realistic job information, job analysis, work family balance, career development,compensation and supervisor support) and their likely impact on the employee intention toleave (EIL) in the Bangladeshi banks. The sample consisted of two hundred thirty threeemployees working for different banks in Bangladesh. The data were gathered byadministering questionnaires. The results indicated that the job analysis, career development,compensation, realistic job information variables were negatively and significantly correlatedwith EIL. Interestingly work family balance was not negatively correlated with EIL. Thesesix variables could jointly explain 67% of the variance in EIL. Results of regressing the HRpractices on EIL showed that compensation and job analysis were strong predictors of EIL.

Moideenkutty et al. (2011) tested the relationship between high-involvement human resourcemanagement practices and organizational performance in the Sultanate of Oman, an ArabianGulf country. Companies listed in the Muscat Securities Market in the Sultanate of Omanwere surveyed. The final sample for that study consisted of eighty seven companies. Surveyresponses were subjected to statistical analysis. The responses to the 24-item high-involvement HRM practices ranged from strongly disagree (1) to strongly agree (5).Financial measures of organizational performance were also used in the analysis for a subsetof the sample for which these data were available. Reliabilities, summary statistics andcorrelations of the measures were calculated. The effect of human resource managementpractices on organizational performance was tested using regression analysis. An importantstrength of the study was the use of both subjective and objective measures of organizationalperformance. Results of the statistical analysis indicated that, after controlling for size, typeof firm (publicly traded or closely held) and average industry price-earnings ratio, highinvolvement human resource management practices were positively related to subjectiveorganizational performance and an objective measure of performance, ratio of market value 73 REVIEW OF LITERATURE

to book value. The results of the study suggested that organizations in the Arabian Gulf canenhance their performance by implementing high-involvement HRM practices in spite of theunique national culture and special features of the labour market in the region.

Sardar et al. (2011) conducted a study to examine the impact of HR practices on employeeengagement in banking sector of Pakistan. It was based on the proposition of Social exchangeTheory. A quantitative approach based survey in form of close ended structured Five PointLikert-scale questionnaires was designed and used to implore the response. The datacollected from 250 employees of four major private commercial banks of Pakistan wasanalyzed through structural Equation Modelling and independent sample t-tests using SPSSsoftware. Outcome epitomized that four HR Practices named employee performanceappraisals, performance reward systems, employee involvement and training &careerdevelopment influenced the employee engagement, decision making/coordination. Theresults showed that there was a significant relationship among employee engagement anddecision making / co-ordination, performance reward systems and employee involvementwhere as training and career development and employee performance appraisals wereinsignificantly related.

Zaitouni et al. (2011) investigated the impact of Human Resource Management (HRM)practices on the affective, continuance, and normative organizational commitment amongemployees in the banking sector in Kuwait. The study was conducted across permanent, full-time, and part-time employees (managers and non-managers) of five large private banks inKuwait. Both Exploratory Factor Analysis (EFA) and hierarchical regression analyses wereused to draw the relationship between these variables. The results showed that fifty percent ofthe variables confirmed previous studies and the remaining fifty percent did not support thesestudies due to factors such as culture and values.

Atteya (2012) conducted his study to extend previous research by proposing and testing anintegrative model that examined the mediating variables underlying the relationship betweenthe human resource management practices and job performance. Data were collected from549 supervisors in the petroleum industry in Egypt. The correlation and multiple regressiontechniques were used to test hypotheses. It showed significant positive correlation betweenhuman resource management practices and job satisfaction, organizational commitment and 74 REVIEW OF LITERATURE

performance of insurance companies in Nigeria. He also examined whether the effectivenessof strategic HRM practices on organizational performance was contingent on organizations‘work place climate. A multi-respondent survey of eighteen insurance companies wasundertaken and data collected was subjected to regression and correlation analysis as well asdescriptive statistics in pursuance of the study‘s stated objectives. Organizational climate wasmeasured through a set of questionnaire that was developed based on the eight organizationalclimate dimensions. Study results suggested that strategic HRM alignment, line managementtraining, career planning system and job definition were the key strategic HR practices thatinfluenced organizational performance in the Nigerian insurance industry. Results alsosuggested that the relationship between strategic HRM practices and organizationalperformance in the Nigerian insurance industry was moderately influenced by organizationalclimate.

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2.4 HRM in Public and Private Sectors

Boyne et al. (1999) studied the HRM in public and private organisations of UK empirically.The evidence presented in their study suggested that, in the area of HRM at least,organizational policies and practices in the public and private sectors remained different inmany important respects. In particular the traditional style of paternal, standardized andcollectivized HRM was more prevalent in public than private organizations. Furthermore,activities associated with the conventional state role as a model employer, such as stafftraining and the promotion of equal opportunities, were still more likely to be found in publicorganizations. Although their results showed that HRM varied significantly between thepublic and private sectors, it might be possible that the distinctions had become lesspronounced over time. The differences that they identified could simply reflect a lag in theadoption of new management practices by public agencies, perhaps because privatecompanies are more quickly influenced by 'management fads' (for example downsizing anddelayering). In this case, public and private management might always appear to besignificantly different, even if they are both moving in the same direction.

Budhwar (2000) compared and highlighted the HRM in public and private sectororganisations in India. The study was conducted after the liberalisation to show the effects ofreforms on HRM. Indian firms having two hundred or more employees in six industries in themanufacturing sector were the main survey sample for the study. The questionnaire surveywas used to collect the data and 15 sections of HRM were included in this questionnaire.Descriptive statistics and t-test revealed that mixed picture was there if a comparison of boththe sectors was made for HRM practices. However, moderate to strong differences existedamong both public as well as private sector organisations.

Harel and Tzafrir (2001) conducted a study to empirically examine if there were differencesin the way that HRM practices were performed in the private and public sectors of theeconomy. The theoretical base of this investigation was anchored on the proposition thatsome HR practices are always better than others and that all organizations should adopt these"high performance work practices." According to the study, the organizations in the publicand private sectors had witnessed many changes in their environment in last few years. Thesepressures had pushed organizations from both sectors to continuously improve their 76 REVIEW OF LITERATURE

performance. The researchers focused on the macro-level of the organization and itsproductivity. A total of one hundred two questionnaires were completed and returned byhuman resource VPs, representing 44 percent of the firms contacted. The hypotheses weretested using data describing human resource management operation. The authors found thatpublic sector management emphasized those HRM domains that dealt with employeeselection and grievance procedures because of the sector's high level of unionization. On theother hand, private sector management emphasized employee growth and pay forperformance. Nevertheless, the authors also found evidence that the public sector was"moving" closer and closer to the private sector model by adopting "high performance workpractices" in order to overcome the turbulent environment and public demand.

Budhwar and Boyne (2004) compared human resource management (HRM) practices inIndian public and private sector organizations. The investigation was based on aquestionnaire survey of one hundred thirty seven large manufacturing firms (publicsector=81, private sector =56). The key areas of analysis included the structure of humanresource (HR) department, the role of HR function in corporate change, recruitment andselection, pay and benefits, training and development, employee relations and emphasis onkey HRM strategies. Internal labour markets (ILMs) were used to make the comparativeanalysis. The statistical results showed a number of similarities and differences in the HRMsystems of Indian public and private sector organizations. Against the established notion, theresults of this study revealed that the gap between Indian private and public sector HRMpractices was not very significant. Moreover, in a few HR functional areas (for example.compensation and training and development), Indian private sector firms had adopted a morerational approach than their public-sector counterparts.

Ayanda and Sani (2010) attempted to examine the effect of strategic HRM practices on theeffectiveness of public sector organizations. Two hundred and fifty five civil servants cuttingacross thirty ministries and agencies in Niger state were sampled. Using correlation andmultiple regression analysis, the results indicated that strategic HRM was moderatelypractised by ministries and government agencies in Niger State. Results also found thatstrategic human resource management alignment with overall government objectives; linemanagement devolvement, training and development, compensation, career planning systemand employee participation were the most important strategic HRM practices that impacted 77 REVIEW OF LITERATURE

more on organizational effectiveness in the public sector. The study recommended thatgovernment should consider the benefits of integrating their HR function with the overallgovernment strategy and operations and that special attention should be given to the trainingof non-personnel officers in HRM in order to achieve the objectives of devolvement.

Singh (2010) examined the impact of the HRM practices represented by planning,recruitment, selection, performance evaluation, training and development, careermanagement and rewards on managerial effectiveness in public sector organisations. Fourorganisations were studied for this research. This study clearly indicated that the HRMpractices along with organisation culture play a significant role and affect the managerialeffectiveness of the organisation. Training and development was found to be a significantpredictor of managerial effectiveness in public sector organisations.

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2.5 HRM in Indian banking

Mankidy (1996-97) discussed about the intake of employees at the officer level whichfollowed a closed system for promotion in Public Sector Banks. There were mainly two partsof entry into the profession: at the clerical level, the Banking Service Recruitment Boardfilled 75-100 per cent of the vacancies via screening; and at the Junior Management level, 20-25 per cent of vacancies was filled via outside recruitment. 1980‘s witnessed a phase ofconsolidation, where Government initiated several measures to improve Human ResourceManagement in the Banking Industry. Some of the measures included: introduction of jobrotation scheme for the Bank staff; stoppage of overtime; compulsory rural and semi-urbanpostings; and blockage on recruitment. A few areas in the field of Human ResourceManagement were also discussed by Narasimham committee in 1991, which included: over-staffing especially in metropolitan and urban areas because of trade union‘s pressure andmanagement‘s weakness, thus, leading to increased staff cost; trade unions in Banksencouraged resistance to mechanization and computerization; and various obstacles torational policies related to promotion, staff transfer; and poor quality of discipline.

Kaur (2007) mentioned that the Voluntary Retirement Scheme (VRS) was visualized to assistIndian Banks in their efforts to optimize the use of human resource and to achieve a balancedage and skill profile in tune with their Business Strategies. Eighteen Public Sector Banksoffered voluntary retirement scheme employing 7,35,977 employees out of which around 14percent opted for voluntary retirement scheme, although after severe opposition fromemployees. At the same time, Banks started recruiting specialists in various fields such astreasury management, credit, risk management, information technology, and HumanResource Management in order to meet the global standards. Banks also developedcentralized personnel database containing skill profile, age profile, training profile, whichwere essential for effective and optimum Human Resource Management.

Jyothi and Jyothi (2008) studied the major challenges related to HRM in Indian Bankingsector and suggested that change was the only constant factor in this dynamic world andbanking was not an exception to it. The major challenge faced by banks was to protect thefalling margins due to the impact of competition. Another significant impact of banks was theuse of technology. There was an imperative need for not mere technology up gradation but 79 REVIEW OF LITERATURE

also its integration with the general way of functioning of banks. All this was possible withthe help of efficient human resource management. However, the challenges faced in the HRfront were numerous and needed to be handled diligently. This study attempted to identifyHR challenges in the Indian Banking context and suggested that the banks in near futurewould have to address compensation issues, flexible work schedules, outsourcing andretaining talent. To face the challenge, banks required enhanced skills, new knowledge andbehavioural adjustments of human resources.

Khera (2010) made an attempt to investigate the extent to which Commercial Banks of Indiadiffer on aspects of human resource management practices and the key Human ResourcePractices contributing to employee productivity. One hundred eighty four respondents fromthree commercial banks of India, one private sector, one foreign sector, and one public bank,formed the sample of the study. Data were collected from the employees at branch. Thequestionnaire containing 80 items, out of which 71 items were framed on 17 HR practicesand 9 items on employee productivity, was used. The 17 HR practices were givennomenclature as factors which included, manpower planning, recruitment & selection,motivation, performance management, reward system, training & development, careerplanning, creativity & innovation, team building, grievance redressal, Quality of Work Life(QWL), employee participation, employee accountability, compensation management,benefits and services, discipline and incentives. The employee productivity was taken asdependent variable. In order to compare various human resource practices among therespondents of three banks, Duncan‘s mean test was carried out in this study. The results ofthe t-test revealed that there was a significant difference between the three banks in practisingfour human resource practices namely, grievance redressal, and quality of work life,compensation management and incentive system. The results of this study strongly supportedthe research question as there was a significant relation of employee productivity with humanresource practices including selection, employee benefits, compensation, training and staffingpractices. The study also found that the banks with high disciplinary action were not able toreap a sustained performance advantage, as indicated by the significantly negative associationwith employee productivity. This paper concluded that if the commercial banks in developingcountries like India were able to successfully implement HR practices, they could achieve themaximum contribution of their employees, although, the economic and political environmentwithin which HR practices operate was not that conducive. 80 REVIEW OF LITERATURE

Sekhar (2010) proposed a HRD model for better understanding of HRD framework.Encouraged by the thought that an attempt to conceptualize a model of HRD in Banks wouldpay in the long run making modem financial institutions growth oriented and dynamic, thisstudy proposed a conceptual model of HRD and application of such model in financialinstitutions. This model has been shown in figure 2.5. He also attempted to propose somenew strategies to make HRD activities more meaningful and result oriented in financialinstitutions. Besides, this study also introduced the function of HRM from a strategicperspective in modern banks with a view to improve upon the operational efficiency and thequality of services in the context of emerging economies.

Figure 2.5 Model of HRD in Banks

Source: Sekhar (2010)

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2.6 Need for the Present Study

The review of literature in this study provides the deep insight of the work done bythe experts and researchers on various aspects of HR practices in banks especially public &private sector banks. Most of the researchers have done their work by taking the role of HRMas a whole, in the effectiveness of the organisations. Some have tried to find out the majorHR challenges. Only a few studies have been taken up to know the innovative HR practices& their impact on the employee productivity as perceived by the employees of differentorganisations. None of the studies has tried to find out the perceptions of the employeesregarding the emerging challenges of HRM in the Indian banks because of these HRpractices. And if some of them have done research work in the related areas, then the samehas not been carried on in the India. Therefore, a need was there to know the extent andimpact of innovative HR practices adopted in the Indian Banks as per the perceptions of theirown employees. Literature on HRM suggested that the practices or their close versions seemed to haveapplicability both in developed countries as well as in an emerging economy like India, andtherefore might be relevant to most sectors and industries anywhere in the world whereverthere was a competitive market economy. The adoption of different innovative HRMpractices in some of the Indian companies had improved business performance. This foundsupport from recent studies linking HRM activities and firm performance. Therefore, thebanking sector also needs to incorporate such innovations being the most important servicesector of the economy. HR practices have been gaining greater importance in the presentscenario of the banks. To meet out the present challenges and to be ready for the emergingchallenges before these banks, the HRM base must be strong. Thus, this research problem hasbeen chosen keeping in mind the well versed significance of the HR challenges before thebanks so that the forthcoming researches may at least test their taste for the prevalentchallenges and help the banking industry in coping with the growing competition. Moreover,some innovative HR practices need to be identified among various banks in different sectorsof Indian banking. The present study will provide a big insight to researchers, bankers, top managementof the Indian banks and other organizations of the concerned field. In other way, the presentstudy, as the researcher visualizes, will not only be intellectually arousing for academics butwill also prove considerable to the different stakeholders in the public sector banks of India. 82